Government Tax Revenue is in Secular Decline
Most equity markets and investments are down around 40% on the year. Let’s say housing is down 20-30% on its way down to 40%. Consequently local, state, and federal government tax revenue prospects are severely damaged.
Property taxes will go down precipitously on the decline in home values. There will be no capital gains revenue for cities, states, and federal governments. In fact, companies and individuals are going to sit on huge 40% losses which they can carry forward for a long, long time. Governments are not going to see any material capital gains for several years.
Unfortunately governments have built up huge liabilities in the last few “boom” years. Policemen, transit workers, and teachers were able to negotiate significant increases in benefits with tax revenue on the upswing. I don’t see how state and local governments are going to remain solvent given the circumstances. Already states are tens of billions dollar in the hole and this is just the beginning. The end-game is the Federal government to print trillions of more dollars to cover the state and local deficits.
The scary scenario with trillions upon trillions of United States government debt being created is “What if Asian countries that buy this debt like China say “no mas”? The dollar will plummet and all our assets may then decline severely in value. I hope that doesn’t happen, but I fear it does.